The integration will form a pyramid product structure with Thomson Reuters enhanced due diligence service at the top of the pyramid.

The next layer will be our company’s Org ID KYC managed service, which includes a team collecting data directly from customers to fill KYC records.

Next the public KYC records, an integration of records from Org ID and the Clarient Entity Hub PKYC service that supports and maintains records based on two million legal entities held by Avox, the other well-established database service acquired from DTCC.

The bottom layer of the pyramid will integrate Thomson Reuters reference data service and Avox legal entity data.

Steve Pulley, Managing Director, Risk Managed Services, Thomson Reuters commented, “The selection of Thomson Reuters by the founder banks and DTCC as the firm to lead the next wave of development in this exciting space reflects the progress we have made in our legal entity and KYC managed service franchise over the past three years including the successful launch of the industry-first regional KYC service last year in Africa.”

Data security

Security of data is paramount in third party KYC services. All three companies - Thomson Reuters, Avox and Clarient - already have very tight security policies and procedure covering the working environment, personnel selection and the latest multi-factor authentication techniques. In the future, Thomson Reuters are planning to extend and deepen these procedures.

Charges

Providing KYC services is not and never will be cheap. Thomson Reuters believe that when looking at their charges prospective users need to understand their own costs now and how they are likely to increase due to more regulations and business constraints. Thomson Reuters have set themselves a target of offering an automated service that is 25-30% cheaper than comparable in-house service by “driving scale to their platform”.

Questions on future of third party KYC business

Centralisation of KYC services is happening world-wide internally in banks and other FIs, and in corporates. These acquisitions of Clarient and Avox by Thomson Reuters are a major concentration of the third party KYC services. A Thomson Reuters spokesman believes that there will be benefits for all parties, “With the consolidation of all the participating financial institutions’ customer profiles on to one common platform maintained by Thomson Reuters, corporate clients of ours as well as of Clarient benefit. And this acquisition strengthens further our well-established presence in serving the KYC and on-boarding needs of corporate treasuries worldwide. While Clarient does not particularly add to Thomson Reuters global footprint in this respect, their clients clearly benefit from now having access to our common platform.”

This concentration of the third party KYC processing and data management business raises important questions for corporates (many of which we have covered before) because, increasingly, the KYC services offered by third parties will be more efficient and comprehensive than you have internally:

who do you really trust?

will you put any of your KYC data etc. with a third party (many of your bank(s) are already using them and more and more you will be asked to supply information to them)?

if you go with a third party will you: just use one, two? Just the one your bank(s) use(s)?

CTMfile take: Centralisation of KYC services is happening. The use of third party KYC services is growing inexorably (particularly by banks and FIs), corporates need to decide how they will handle the pressure to use them.